Essentials of Economic Theory Part 21

_Actual Pay of Unorganized Labor._--A static a.s.sumption excludes enforced idleness on the part of able-bodied men. The changes which throw such men out of employment are not taking place, and there is no reserve of efficient but idle labor. In the actual state, which is highly dynamic, such a supply of unemployed labor is always at hand, and it is neither possible nor normal that it should be altogether absent. The well-being of workers requires that progress should go on, and it cannot do so without causing some temporary displacements of laborers. Though no individual were long out of employment,--though a particular man were in this condition only briefly and during the period occupied by a transit from one occupation to another,--there would always be in the general market some unemployed men. If we throw out of account those who are idle because of personal disabilities, it will remain true that really efficient men can nearly always be had, if only a few are at one time needed. The presence of even a few men able to do good work and not able to get employment is often sufficient to make individual bargaining work unfairly to the laborer.

When the employing of one man is in question, the employer has other alternatives, and the man may not have them. The employer may much more readily set men bidding against each other for a vacant place than any of the men can set employers bidding against each other for an idle man. This strategic inequality between the parties in the wage contract becomes greater as the supply of unemployed men becomes larger. At some times and places it may force the pay of many workmen downward toward a minimum set by what the unemployed will consent to take.

_The Effect of Local Organization._--Organization means collective bargaining and tends to equalize the strategic positions of men and employers. Where an entire force of workers must be dealt with at a time, the employer has not the alternative ready to his hand which he would have if he had only to employ a single one. If his employees strike, he cannot at once secure another force large and efficient enough to meet his needs. If his men allow their places one by one to be filled, the strike will be disastrous to them, indeed, but it will also be a misfortune for the employer. His new force will be inferior to his old one, first, because many of the new men will be personally inferior to the old ones, and secondly, because as a body they lack effective training and will not work together as efficiently as did the old force. He can afford to pay for the disciplined workers the amount that the new force will produce with two plus marks attached--one representing the superior personal quality of the former employees and the other representing the value of discipline. In other words, he can afford to make two distinct additions to the amount that unemployed men are worth to him in order to retain his old employees.

This is on the supposition that it is possible to gather from the force of idle men enough to operate a single establishment. Without organization and by means of individual bargaining, wages are drawn downward toward the level set by what idle men will accept, which may be less than they will produce after they receive employment and will surely be less than they will produce after they have developed their full efficiency. With organization which is local only, and with collective bargaining that goes only to the extent of adjusting the pay of men in one establishment, this pay comes nearer to the standard set by the productivity of labor than it would if bargains were individually made. The employer balances in his mind the value of a new and raw force and the value of a selected and disciplined force, measures the difference between these values, and will often pay a rate that is between the two amounts and under average conditions is likely to approach the larger of them.

_Wages as adjusted by a General Organization of Labor in a Subgroup._--Where organization goes to the length of uniting all the employees in a particular industry or subgroup, the situation is unlike the foregoing in an important particular. No quick filling of the places which the men may vacate with altogether new workers is possible. The employers are not so situated that they can compare the old force with a new one, measure the difference in their values, and govern their conduct accordingly. The training of an entirely new force is indeed a remote possibility, if the business can wait for it, but it can seldom do this; and a strike that runs through a subgroup presents to employers the alternative of winning the workers by concessions or allowing their business to stop. If it stops, it becomes a question of endurance between the employer and the employees, in which the employer has the advantage so long as the public does not interfere. We shall recur to this condition when we study the effectiveness of strikes and boycotts under various conditions. Under all three of the conditions we have just described, the static standard of wages--the final productivity of social labor--still exists; and the actual pay of labor tends toward it, but differs from it by varying amounts, according as labor is unorganized, locally organized, or organized throughout a subgroup. In the first case the worker may get materially less than the standard amount; in the second case he may get something closely approaching it; and in the third case, for reasons to which we shall later give attention, he may be able to get the full amount and somewhat more. A particular employment which is strongly organized and which makes the utmost use of its organization is often able to carry the pay of its employees to a level that is distinctly above that set by the productive power of _marginal social_ labor. Nevertheless, the amount of this overplus which the favored worker gets is limited, and the standard fixed by marginal productivity is one on which the pay of these workers and of all others depends, though it may not coincide with it.

_The Power of a Universal Organization of Labor._--In the days when the wages fund theory held sway it was believed that organization could not materially advance the interests of labor as a whole, since it could not add anything to the fund which was destined in any case to be divided among the laborers. Now that another theory of wages is generally held, it is still clear that what organization can do for the entire working cla.s.s is limited. By no possibility can it insure a rate of pay that will permanently exceed the product of labor, since employers would then be interested in reducing the number of their workmen and so raising their product _per capita_ to the level of their pay. This would result in a large force of idle laborers, whose compet.i.tion would have its depressing effect on the labor market. Up to the natural limit set by the specific product of labor a universal organization might successfully carry its demands. Moreover, this result would require no use of force--no "slugging" of non-unionists, since there would be none to be slugged. The mere fact of a universal organization maintaining discipline and preventing breaks within its own ranks would suffice for the end in view--the maintenance of pay that should conform to its natural standard. The supposition of a universal organization of labor has at present only a theoretical interest. What society has to deal with is an organization that includes a small minority of workers and is composed of separate unions which are endeavoring each to promote the interests of the men of its own craft. It is a type of organization which, instead of uniting all workers, makes the sharpest division between those in the unions and those outside of them, and creates a lesser opposition between the different unions themselves.

_Organized Labor and Monopoly._--Actual trade unions do not always rely upon mere collective bargaining. They sometimes aim to secure a partial monopoly of their fields of labor; and as it is impossible to do this if unemployed men or men from other fields of employment are free to enter their territory, they must be kept out of it. They can only be kept out by some use of force, and coercion applied by the workers in a well-paid field to the men who seek to enter it during a strike is a part of the strategy of trade unions.

_The Ground on which the Use of Force is Justified._--Organized laborers claim a right of tenure of their positions; they claim to own them much as a man, by right of prior occupation, owns a homestead.

They claim the same right to repel intruders from their field of employment that a man has to drive interlopers from his grounds. "Thou shalt not take another man's job" is a recognized commandment on which they claim the right to act.

_The Mode of Justifying the Use of the Force in Guarding Vacated Positions._--Coercion is a comprehensive term and does not always involve personal a.s.sault. What it inflicts on the recalcitrant may range all the way from social opprobrium and boycotting to literal striking, maiming, or killing. In every case it involves some injury and is contrary to the spirit of the law, unless the right of tenure can be fully established. If the employer has no right to turn off his men and take new ones, and if the new ones have no right to come at his invitation, there is a rude a.n.a.logy between the effort of the non-union men to get the places and an effort to get away a man's farm. It is a matter of course that the employer may rightfully discharge men who prove worthless and fail to render the service which is contracted for. The question is whether he has the right to dismiss them when they will render the service only on what seem to him exorbitant terms. On this point the verdict of his own reason is extremely clear. To offer to render the service only on exorbitant terms has the same effect as to offer an inferior service on the original terms, and the right of tenure which the workingmen claim, if it exists at all, is contingent on the rendering of effective service on reasonable terms. On the supposition that they have owned their places at all they seem to their employer to have forfeited them when they have insisted on too high wages. On this point, however, the men's reason may give an opposite verdict, though it is based on the same principle. To them the terms they insist on may appear reasonable, and they then think that, because they are so, their owners.h.i.+p of their positions is valid and that other claimants are usurpers. Both parties in the dispute base their contentions on the supposed reasonableness of the terms they demand.

_The Necessity for Knowing what Terms are Reasonable._--A momentous question both for society and for the working people is whether there is any way of ascertaining what terms are reasonable and securing conformity to them. What we shall find is that it is possible to keep in view the natural standard of wages, as in an early chapter we have defined it, and that it is possible, in the midst of the struggle of ma.s.sed capital with ma.s.sed labor, to secure a certain degree of conformity to this standard. It is possible so to shape the system that a wide difference between actual pay and standard pay will not exist, and that wages will everywhere tend toward their natural levels, as they did under that earlier regime before either the capital or the labor of a subgroup acted collectively.

_The Att.i.tude of the Community toward Striking Laborers._--So long as a local community sympathizes with the worker's dread of compet.i.tion and tolerates his claim of owners.h.i.+p of his position, it does not utterly condemn and repress every use of force in a.s.serting his claim. The local public is partly composed of friends or neighbors of the striking worker and is reluctant to interfere with the worker's effort to defend what he considers his property--that is, his right of employment in a business to which he is accustomed. The community sympathizes with his fear of the hards.h.i.+p which may result when employers freely utilize idle labor as a means of defeating strikes.

On the other hand, even a local community realizes that much toleration of force means anarchy. If the violence is not resisted or repressed, the strikers acquire a monopoly that is not dependent on the justice of their claims. The whole question of reasonableness in the terms demanded is forcibly set aside, and the pay that is established becomes, not whatever a calm verdict of disinterested persons would approve, but what workers by brute force can get. Even a local public is unwilling to see the social order completely subverted and mob rule subst.i.tuted, and it usually interferes when violence goes to that length; but in its unwillingness completely to repress disorder, on the one hand, or to leave it wholly unopposed, on the other, a local government pursues a wavering policy, now repressing anarchy and again leaving it to gather headway. It seldom affords full protection to the non-union men who work during a strike. Moreover, it is the habit of state governments not to interfere with local affairs until the public peace is endangered, and therefore not until the coercion of free laborers has gone to great lengths. The federal government only intervenes in great emergencies. Non-union men working during a strike are left largely in the hands of the local community, which often tolerates enough of violence to give to strikers a measure of monopolistic power. The wavering policy of the local community in regard to preserving the peace expresses a corresponding mental wavering. The public obeys no clear principle of action in this connection and merely allows some "slugging" when it sympathizes with strikers, but not, as a rule, when it does not. We have to see whether this rule has in it any germ of a legitimate policy.

_The Sole Mode of Escape._--The sympathy in the case depends, as we have seen, on the off-hand impression of the people as to the reasonableness of the strikers' demands; and for such an impression there may or may not be an adequate ground. It is evident that no authoritative verdict has in these cases been p.r.o.nounced. The only escape from the intolerable situation which is thus created is by testing the equity of the laborer's demands and adjudicating his claim to a tenure of his position. The possible method of doing this we will presently examine. It is clear in advance that what is to be done is to determine what pay is reasonable. The worker cannot rightfully retain the owners.h.i.+p of his job if he does not work properly; and he cannot so retain it if he works properly and claims exorbitant pay.

Fair dealing between employer and employed must be attained if his tenure is even tacitly recognized. The worker who accepts a rate of pay that is p.r.o.nounced reasonable may safely be confirmed in his place and protected from any persecution on the part of his employers. The worker who refuses a rate which some competent authority has p.r.o.nounced reasonable thereby forfeits his right of tenure in a definitive way. His place is clearly the property of whoever will take it, and the state is bound so completely to preserve order as to make a new worker perfectly secure from injury. This means that it must do intelligently and thoroughly what a local community weakly tries to do when it lets strikers guard their positions if it sympathizes with their cause, and represses such attempts when it does not. The sympathy needs to be crystallized into a clear verdict as to the rightfulness or wrongfulness of the rate of pay demanded, and the local toleration of violence in cases where the men's demands appear just needs to become an open and frank a.s.sertion of their right to employment on the terms demanded; while the tardy repression of the violence in cases in which the demands seem unjust needs to become a prompt and complete repression of it.

_The Preservation of the Mobility of Labor Indispensable._--Any use of force, anything, however slight, that deprives labor of its mobility, destroys the condition on which the law of wages is predicated. A perfectly free flow of labor from point to point in the industrial system is essential to a static state, and to any approximate conformity of actual wages to the static standard in a dynamic state.

The plan which divides labor into sections and arrays one part of the force against another makes realization of natural wages impossible.

While all differences of pay which correspond to differences of productive power are normal, those which are based on a monopolizing of fields of labor by some and the exclusion of others are abnormal.

They cause the rich fields to be surrounded by impa.s.sable walls and force the bulk of the population to work on the outer and poorer areas.

_The Wide Range of Difference between the Pay of Different Cla.s.ses of Laborers under Trade Unions._--The possible range of the rise of pay which monopoly may insure for certain laborers is far greater than that which any action can secure for labor as a whole. Mere collective bargaining makes some difference, indeed, but where there is no attempt to exclude from a favored field workers of the poorly paid cla.s.s, the range of difference is not great. To double the pay of laborers of every cla.s.s would require more than the entire income of society, and yet it is possible for a few workers to make as large a gain as this. Some organizations without monopoly may keep the actual pay of labor somewhat near to its theoretical standard. With monopoly they may carry it far above the standard set by the marginal productivity of social labor.

_The Differing Efficiency of Organization as used against Different Cla.s.ses of Employers._--When employers are acting independently, a trade union which deals with them one at a time may very easily bring the pay of its members up to a certain average standard. A strike against a single producer may be very disastrous for him, since it may cause him to lose his customers. If the general state of business is good, he will pay all that he can rather than see business drift away from him, but what he can pay is somewhat strictly limited. He cannot safely give more than what is given by most of his compet.i.tors.

Organization in such a case is a good equalizer of pay, and as its power is used against different employers successively, it suffices to raise general pay toward or to a standard set by the productivity of the labor. Moreover, as a rule, it can accomplish this without any appeal to violence. A modest and reasonable demand enforced by a wholly peaceable strike is likely to be conceded.

_The Power of a Strike against All Entrepreneurs in a Subgroup._--A strike against employers in an entire subgroup may gain more for the workmen, but the more ambitious effort encounters stronger resistance.

The employers, we a.s.sume, are competing still and have not the power which a monopoly would give them to raise the prices of their products. Nevertheless, they can concede somewhat more when they act together than one of them could concede separately. A concurrent raising of prices is entirely possible without any positive combination of the producers who follow such a course. Moreover, the strike itself, if it continues for any length of time, creates a scarcity of the products and a rise of prices. Though the employers in the end may concede what their workers demand, or some part of it, the settlement may not cost them anything, since the advance in prices may enable them to take all that they give their men out of the pockets of the public. The strike by a trade union against competing employers has as one ground of early success the employers' distrust of each other. The danger is that as soon as prices become at all firm, one or another of the employers may quickly make terms with his men in order to seize the opportunity for new business. For this very reason, however, the range of possible gains from a strike running through a whole subgroup is smaller than it would be if the employers were organized, so that all of them could safely wait for a larger rise of prices before making terms with their men. The possible increase of pay without a combination on the employers' side is distinctly larger than any which a strike against a single employer can usually secure.

_The Power of a Strike against a Union of Employers._--Still keeping the supposition that there is no coercion invoked and that strikes are quite orderly, we find that they may gain more when employers are consolidated than when they are not so, but that they are likely to encounter still greater resistance. The demand--"Pay us more and charge it to the public"--may be conceded, and probably will be so if the employers dread the hostility of their own men and the action of the state in enforcing a resumption of business. If they have no such dread, their power to resist a strike is much greater by reason of consolidation. They can safely hold out long if the public will let them do it. No one of them is in any danger of seeing others take his customers. Their hold upon their const.i.tuency is secure, and their power to tax the const.i.tuency and make it pay for whatever a strike may cost is very great. A strike under such circ.u.mstances may win much for the men or it may win nothing whatever, and the difference between these results is mainly determined by the att.i.tude of the people. If the government will hold its hands and let the producers work their will, they may (1) allow the strike to run for a time, concede something to their men, and raise prices enough to recoup themselves with a surplus; or else (2) they may let the strike run longer, till the men are tired out, take them back without concessions, and still put the same tax on the public as in the other case.

_Effectiveness of Coercion as used against Non-union Men._--As a peaceful strike has different possibilities according as it is used against a single producer, a body of competing producers, or a consolidation of producers, so coercion employed against independent workers has correspondingly different effects in the three cases. When it is used in the case of a strike of the first cla.s.s, it enables the men to carry their point more quickly, but does not materially increase the amount they can gain. If the independent producer is unable to run his mill till he makes terms with his original workers, he will be in greater haste to make terms, but the amount he can yield is limited almost as closely as before by the prevailing rate of pay.

In the case of a strike of the second cla.s.s which runs through a subgroup in which producers are still without union, coercion adds greatly to what the men may gain. It may fix and enforce a rate of pay which all employers must give, and circ.u.mstances will compel them to charge it to the public in whole or in part. The marginal producers who have no net profits must charge the whole advance to the public or go out of business, and the result may be that some of them may go out. The advance in the rate of pay conceded by others may come partly out of their own profits and partly out of consumers' pockets.

With employers in a great consolidation the possible advance of wages is at its maximum. The employers are in a position to charge to the public all that they give to the men, and more. If the state allows them to do it, they may thrive by repeated strikes. Whether their men thrive or not depends on their power to bar other labor from their field and to live without work long enough to induce their employers to yield.

The effect of coercion on the wages of non-union laborers means a lowering of their pay. It confines them to the less productive field which is open to them.

------- 1. _______ Wages of union labor which monopolizes its field and deals with competing employers.

2. _________________ Wages obtainable by union without monopoly approximating the natural rate.

3. ----------------- Level of pay with no unions in the field.

4. _________ Wages of non-union labor excluded from the more productive fields.

5. _________________ Base from which wages are measured.

The height of lines 1, 2, 3, and 4, above the base line 5, measures wages, and the length of the lines rudely indicates the numbers of workmen in different cla.s.ses. The dotted lines above and below line 1 represent what union labor which maintains by force a monopoly of its field may be able to get from employers who are in a combination. It may be more than competing employers would give or it may be less.

For men in strong unions who have _carte blanche_ to defend their fields, the policy of leaving other labor to its fate is overwhelmingly the more profitable. With a choice between gaining a hundred per cent in wages for ourselves or ten per cent for working humanity, self-interest speaks decisively in favor of the former alternative.

In connection with the actual dealings of workmen with their employers the following are the princ.i.p.al facts:--

1. When labor makes its bargain with employers without organization on its own side, the parties in the transaction are not on equal terms and wages are unduly depressed. The individual laborer offers what he is forced to sell, and the employer is not forced to buy. Delay may mean privation for the one party and no great inconvenience or loss for the other. If there are within reach a body of necessitous men out of employment and available for filling the positions for which individual laborers are applying, the applicants are at a fatal disadvantage.

2. Collective bargaining is a partial remedy for this disability and brings the pay of labor closer to its normal standard than, under individual bargaining, it could possibly be, but does not, of itself, enable one cla.s.s of laborers to raise themselves to a position which is very much above that of a majority of the others. It gives to no cla.s.s of workers any monopoly of their field or any power to tax the public or oppress men who are unorganized. It is a normal and democratic measure.

3. Many actual trade unions do not depend upon mere collective bargaining, but aim to secure a special gain through a partial monopoly of their several fields of labor. Their policy is exclusive in that it tries to limit the number of men who are admitted to the unions and to prevent non-union men from working at the craft.

4. In the establis.h.i.+ng of such control of fields of labor some force is employed in order to bar from the fields men who would gladly enter them. "Slugging" is a frequent part of the strategy used when strikes are pending, and this elastic term covers a wide range of deterrent arguments. Whatever goes beyond a verbal demand or insult to the man or his family and involves any use of physical force is included in the meaning of the term, and the action ranges from small injuries to the clubbings which maim and kill. Moreover, social ostracism is to be rated as tantamount to force as a means of preventing a free movement of labor.

5. When the resort to force is defended, it is on the ground that the organized laborers have a right of tenure of their positions and that they may vacate them and still hold them as quasi-property. One man should not "take another man's job" even after the other man has left it. Acting on this claim, union laborers treat men who attempt to occupy the vacated places much as a man would treat intruders on his land or in his house. It is, as is claimed, a case in which a man must be his own policeman and protect his property.

6. The public sympathizes with the worker's dread of the compet.i.tion which he encounters when unemployed men are gathered from near and far and set working in strikers' positions. It even tolerates, in a way, his claim of quasi-owners.h.i.+p of his position, and though it condemns the violence with which he enforces the claim, it does not summarily repress the violence. It is without a well-defined policy and often weakly permits disorders to grow into anarchy which only troops can quell. Local governments are often reluctant to lay vigorous hands on "sluggers," even when to do so would forestall the necessity for severer measures. This is due to an instinctive feeling that hards.h.i.+p and injustice may result from allowing employers to utilize a reserve of idle labor as a means of depressing their employees' wages and defeating strikes.

7. It is realized, on the other hand, that giving to violence a free rein means an amount of anarchy which no state can tolerate, that non-union laborers have, under the law, a claim to protection, and that allowing strikers to drive them from the field is permitting a monopoly to be established by crime.

8. The reluctance promptly to repress violence, on the one hand, or to leave it unopposed, on the other, expresses a mental wavering, since the state perceives and follows no clear principle in this connection.

It has neither defined the nature and extent of laborers' rights nor provided for any orderly process for securing them.

9. The only escape from this situation is by arbitration. It is necessary to adjudicate the laborer's demand for wages and to legalize his tenure of place on condition that he shall accept a just rate of pay. The state is bound to ascertain and declare what rate is just, to confirm the workers in their positions when they accept it, and to cause them to forfeit their right of tenure if they refuse it. If the workers thus forfeit their claim, their positions are clearly open to whoever will take them, and the state is bound to protect the men who do this. Such appears to be the present situation, and an essential feature of it is the need of ascertaining on what principle a court of arbitration should proceed in determining what rate of pay is just.

CHAPTER XXVI

THE BASIS OF WAGES AS FIXED BY ARBITRATION

The state needs an authoritative mode of determining what rate of pay is "reasonable." This duty is often imposed on boards of arbitration, for whose guidance no definite principle of justice has as yet been prescribed. Such a board has to depend on its own intuitions. It approaches its difficult work, having no legal rule for reaching a decision, and yet compelled, if possible, to reach one which will actually settle the dispute referred to it and enable production to go on. It must try, in the verdict it p.r.o.nounces, to satisfy its own sense of equity. What such a tribunal has, in most cases, actually done has been to make compromises, and this has measurably accomplished both of these ends. A verdict that "splits the difference" between the men's demand and their employers' is most likely to cause work to be resumed; and on the ground that each party is probably claiming too much, and that justice lies between the claims, it insures a rude approach to fairness. This action has caused unfavorable criticism of the whole system of arbitration, on the ground that it abandons the effort to reach absolute justice and tries chiefly to end the quarrel on any terms, and also that by giving strikers a part of what they demand, it encourages them to strike again and secure more. We have to see whether a court can do better than this and whether such a crude procedure has tended at all toward putting wages on a normal basis.

_Why a Court cannot reduce Wages in Favored Fields to the Rate prevailing at the Margin of Employment._--A tribunal of arbitration, which has to deal with consolidated capital and organized labor, acts in a field where both profits and wages are higher than they are in most departments of industry. Should a court then take as its standard of just wages what unorganized labor gets when it works for independent employers? That would usually level the pay of the cla.s.s of laborers it is dealing with to the standard set by a much more poorly paid cla.s.s.

Should the court, on the other hand, take as the just rate the one that generally prevails where employers are organized in trusts and workmen in exclusive unions? That would be legalizing the result of monopoly. The court, in such a case, knows that the profits of the business are increased by the employers' monopoly and wages by the workmen's; and yet it will not pull down the rate of pay to the level prevailing where no combinations exist. On the other hand, to legalize any high rate of wages, which is made possible only by a double monopoly, would seem to be equally unjust.